China cannot be ignored, Britain's trade minister says, despite row over embassies

Kyle, on his first trip since being appointed last week, will restart trade talks under the UK-China Joint Economic and Trade Commission (JETCO).

Britain's new business and trade secretary seeks to lift trade barriers worth £1 billion ($1.35 billion) over five years, particularly in agriculture, autos and professional services.

But a decision due next month by Britain's housing department on Beijing's plans to build the largest embassy in Europe in London could jeopardise those trade ambitions, diplomats and analysts say.

Politicians and the United States have warned that China could use the site for spying.

"China, because of its emerging economic status, isn't just unignorable, it is also desirable to engage with," Kyle told reporters.

He was responding to a query whether Britain should follow the European Union in seeking to "de-risk" from the $19-trillion economy and focus on domestic industrial strategy.

"The fact that China poses so many opportunities, but also so many uncertainties, should not deter us," he added. "It should actually engage us and motivate us."

Britain's Labour government, which took office last July following 14 years of Conversative rule, seeks closer economic ties with markets outside the European Union.

Central to this strategy is attracting fresh job-creating investment from China, particularly in the northern industrial heartland.

But a row over China building a "mega" embassy at the site of a two-century-old building near the Tower of London, along with a new British embassy in Beijing, has become an intractable issue in the relationship.

Lawmakers and the U.S. state department have warned the structure could allow Beijing to tap cables linking the Bank of England to the Canary Wharf business district.

"If China wants to have a relationship with Britain that is fit for the 2020s and fit for China as it is today and not 50 years ago and not 100 years ago, then its counterparts that it wants to trade with, to do business with, to negotiate with, must be able to have facilities fit for that time as well," Kyle said, when asked about the dispute.

"Planning applications are independent of government," he said of Beijing's efforts to build its new facility.

Beijing's building plans have stalled for three years, and were delayed again in August after it refused to fully explain several blacked-out sections in its drawings.

Since the last JETCO in 2018, London and Beijing have come to blows over Britain's criticism of China's human rights record in its far western region of Xinjiang and its growing influence in Hong Kong, culminating in the 2020 National Security Law.

In 2020, Britain also decided to remove Huawei equipment from its 5G network by 2027, a move that drew Beijing's ire and came amid intense pressure from the first Trump administration.

China is Britain's third-largest trading partner and fifth-largest export market, taking £42 billion of its goods last year, equivalent to 5.1% of total exports, the British statistics office says.